Good day… And a Happy Friday to one and all! The end of another week… I was out on Monday, and it still seems to have been another long week! UGH! Oh well… It’s Friday, and this weekend is Father’s Day… So, we’ve got that going for us, eh?

More range trading in the currencies yesterday, with the euro leading the currencies higher for most of the day, only to see their gains slip, sliding away by the late afternoon. In the overnight markets, the currencies, once again, have moved higher, but nothing to get all lathered up about…

This morning, the euro got a boost when, in a draft statement from European Union leaders, it was reported that they believe they are seeing the first signs of a “sustainable economic recovery”, and that there will be little to no need for further stimulus of the economy… Now… Normally this would have sent the euro on a trip to the moon, soaring ever higher… But, these days, everyone has to take a statement like that, and temper it a bit with a dose of reality… These guys don’t really know if the economy is going to have a “sustainable economic recovery”… Every country is in uncharted waters with their economy right now, and it remains a possibility that the economy could rebound a bit, and then take a double dip…

That’s what I see happening in the U.S. later this year… Double dipping, which is taboo when dipping chips into salsa or the myriad of different dips… But is a possibility with an economy so deep in a recession / depression, that with all the stimulus, it does show signs of recovery, only to fall back… Because, it was never on terra firma…

Speaking of the economy here in the U.S… Yesterday, we saw the Weekly Initial Jobless Claims remain above 600K for the week, but… The Continuing Claims dropped drastically… And this is where I draw the line between make believe and reality… First of all, no one in the media had covered the Continuing Claims data while it was going up, up and away in its beautiful balloon… But, show a drop, and these knuckleheads were all over it like a cheap suit! OK… So the number dropped… Well… I don’t see that as a “sign that the job meltdown is over”, like many in the media said… When Chris Gaffney told me that the number had dropped, I told him…

That means one of two things… 1. That people are going back to work… Or 2. that unemployed people saw their unemployment benefits expire, which means, and I’ve explained this many times before, so it shouldn’t be a surprise, but it means that they are DROPPED from the list of unemployed! Now… What mental genius came up with that one? Any way… I would put my money on what’s behind door number 2! Wouldn’t you at this point?

When the Bureau of Labor Statistics (BLS) can report a strong jobs number without all the adjustments, then I’ll jump on the job creation bandwagon…

OK… It looks as though the story I told you about the other day, as a potential hoax, but wondered why the media wasn’t covering it, regarding the $130 Billion in bearer bonds confiscated from two Japanese men at the Swiss, Italian border, turns out to be a non-event after all… The bonds, which at first were reported to be “real”, are now being called fakes / counterfeit… So… So much for the secret war financing under the cover a dark knight stuff, eh?

OK… Enough of that… Let’s see what the Fed has up its sleeve these days… The Fed is looking for ways to communicate to the markets that they will NOT be raising interest rates until, at the earliest, 2nd half 2010! Now… They also want everyone to know that they will be quick to remove the stimulus from the markets… One, doesn’t add up to the other one here, folks… And just as the Fed has always been… Cagey… They’re just not being truthful to us…

You see, they don’t want the markets jumping ahead, and moving yields higher on bonds, which would basically shut down the nascent mortgage business recovery… But, they are very quick to say that they will remove the stimulus… I wonder how many people out there really, truly, in their heart of hearts, believe the Fed will 1. know how to remove their stimulus without damaging the economy, and 2. will do it at the right time?

You won’t see me signing up on the roster of those that believe in those two things! Just look at their track record! If you want some insight to the bumbling, tumbling, fumbling that has gone on at the Fed over the years, you should check out a book by William Fleckenstein, “Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve… You can get it on Amazon… It will open your eyes wide open to all the things I talk about regarding Big Al’s incompetence and the Fed’s bungling…

Today is called a Quadruple Witching Friday… No… It’s not because there are 4 witches flying around! Quadruple Witching Friday is a day on which contracts for stock index futures, stock index options, stock options and single stock futures all expire. There have been some strange things happen in the markets on a Quadruple Witching Friday… So, watch out!

The data cupboard has been emptied out this week, which means there are no scheduled data releases today in the U.S. So, we just have the stock stuff to deal with…

I would think that the currencies would just drift today for the most part… However, there’s one currency that seems to be in the mood to outperform all others this morning… The Aussie dollar (A$), is seeing a nice bid and wind in its sails from an overall general feeling that the Reserve Bank of Australia’s next rate move will be up, and not down.

Just like I talked about yesterday with Norway, and their Central Bank (Norges Bank) stating that they believe that they will raise rates next, this gives traders something to “trade on”… And there’s nothing better for a trader to trade on than interest rate differentials…

That makes two Commodity Currencies that are on the list of reversing their interest rate cut cycles… New Zealand / kiwi should be the next to get on this list, but not for some time in my estimation, as the Reserve Bank of New Zealand (RBNZ) is not as optimistic, at this time… South Africa, Brazil, and Canada round out the Commodity Currencies, and I really don’t see any of these three getting on the list any time in the near future… But, South Africa, and Brazil, already enjoy strong interest rate differentials VS the dollar, so it’s not so bad not having them on the list at this point… And Canada? Well… If the price of Oil continues to inch higher and higher, so too will the Canadian dollar / loonie… At least, that’s how I see it!

Australia and Norway don’t see the end of their rate cut cycles because inflation is under control! It’s quite the opposite… And here’s where I think the dollar gets squeezed once again… A double whammy if you will… First you have the Commodity Currencies / high yielders gaining VS the dollar because their interest rates will be higher than the interest rate a dollar can give… But their interest rates will be going higher because inflation is going higher… And… This is the second whammy for the dollar… If inflation is moving higher… Than that too will cause the dollar to be weakened, for an inflated currency is one that is having its value eaten away by inflation…

And then there was this… All my ranting about the Gov’t getting more involved with the markets, and our private lives, led a couple of people to question me regarding this… You see, I keep harping about the Gov’t getting involved in regulatory matters in the markets… Some thought that I was saying that there should be no regulations in the markets… I never said that! I said I didn’t think having the Gov’t involved in the regulatory matters in the markets was a good thing… I mean, we now have a Gov’t that can… Sell you a car, maintain that car, finance that car, and provide you insurance on that car… It’s all just beginning…

Yesterday, The Senate Banking Committee questioned U.S. Treasury Sec. Geithner about these plans to regulate the financial markets… And his answer is something that I’ve told you over and over again would be the answer to everything… “Our economy has been brought too close to the brink for us to let this moment pass.” It’s just more of the old…”these are extraordinary times, and they call for extraordinary measures” talk…

OK… I know, I know, I’ve written the Pfennig for 17 1/2 years, and tried to stay out of politics the best I could… But to see what’s going on now, and now say something is beyond my control!

Of course long time readers will remember me taking the Bush administration to the woodshed too when they placed tariffs on steel earlier this decade, and the spending… So, I’m not just “picking” on this administration!

Errors and omissions… Yesterday I said that Ty Keough’s dad (Harry) had played on the U.S. national team that beat Great Britain in the 1950’s World Cup… It obviously wasn’t Great Britain… It was England… I apologize for that error… And someone also chastised me for calling it soccer… Hey! That’s what we call it here in the U.S!

And then one final note… I guess the Fed wasn’t in buying Treasuries yesterday, as the yield on the 10-year spiked higher to 3.82, from 3.69 yesterday morning…

Currencies today 6/19/09: A$ .8065, kiwi .6415, C$ .8875, euro 1.3935, sterling 1.6440, Swiss .9225, rand 8.11, krone 6.3910, SEK 7.8725, forint 200.50, zloty 3.24, koruna 18.9150, yen 96.80, sing 1.4550, HKD 7.75, INR 48.11, China 6.8363, pesos 13.35, BRL 1.9720, dollar index 80.39, Oil $72.25, 10-year 3.82%, Silver $14.32, and Gold… $937.82

That’s it for today… Well, Sunday is Father’s Day… And the first day of Summer! Speaking of Fathers… I lost my dad in 1995 to cancer. I still think about him every time I’m at a ballgame and the national anthem is played. He always told me to stand tall, and sing loud! He was a great patriot, and father… The Detroit Tigers finally won a game at our new stadium, as they kept my beloved Cardinals from sweeping them last night. It’s less than a month away from the All-Star Game here in St. Louis. I am beginning to get geeked up about this! When my tickets arrive, I’ll really be geeked up! I’m sitting here yawning my head off. I woke up an hour before my alarm was to go off this morning, and couldn’t get back to sleep! UGH! As if, I don’t already get up earlier than farmers! OK… It’s hotter than blazes here, but that shouldn’t stop us from having a Fantastico Friday and Wonderful Father’s Day Weekend!

Source: A Sustainable Economic Recovery?

Wall Street sustained heavy losses, extending a global stock market rout as the Dow opened below 7,000 for the first time since 1997, while the dollar hit its highest level against a basket of six major currencies since early 2006.

European Union leaders’ rejection of a mass bailout for Eastern Europe pushed the euro below $1.26, as did a survey showing euro zone manufacturers had their worst month in 12 years.

But the biggest blow came from American International Group , which announced a $61.7 billion fourth-quarter loss, the largest quarterly loss in U.S. corporate history. Earlier, Treasury threw a new $30 billion lifeline to the company.

Analysts said the news reaffirmed suspicion that more turmoil lies ahead, spurring investors to sell stocks for safer, dollar-denominated alternatives such as Treasuries.

“With all the negative news lately — today from the U.S. insurance sector and the European summit — the market is just not prepared to take on a lot of risk,” said Dustin Reid, senior currency strategist at RBS Global Banking & Markets in Chicago. “So you’re seeing people pile into the dollar.”

In New York, the euro was down 0.7 percent at $1.2578 , after hitting a session low of $1.2547, according to Reuters data. The dollar fell 0.3 percent to 97.19 yen .

The euro was hit hard after EU leaders rejected calls, led by Hungary, for a 180-billion-euro aid package to rescue Eastern European countries suffering through a deep recession. The EU agreed only to help countries on a case-by-case basis.

“It keeps alive the story that sovereign risk in Europe is marching higher as there’s still no coordinated package” to address the problem, said Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York.

If not for heavy selling of the British pound against the euro, he said, the common currency would be vulnerable to a push toward the $1.2330-$1.2350 area last seen in late October.

Sterling tumbled to $1.3959, its lowest level since late January, before edging back to $1.3988 , still 2.2 percent weaker on the day.

‘ROLL CALL OF REASONS’ TO AVOID RISK

HSBC’s 12.5 billion pound ($17.7 billion) rights issue, launched at a deep discount after annual profit more than halved and bad debts soared in the United States, also weighed on risk appetite and pushed European stocks lower.

“There’s a roll call of reasons to stay risk averse — the news from AIG, HSBC and worries about Eastern Europe and that is benefiting the dollar,” said Geoffrey Yu, a currency strategist at UBS in London.

Outside the U.S. dollar, only the yen was seeing a bid among major currencies on Monday as it attracted moderate safe-haven buying as equity markets turned lower. The euro fell 1.1 percent to 122.24 yen.

“The global slump in equity prices appears to be offering a lingering lifeline to the Japanese yen, (though) quite why we’re unsure,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut.

The yen used to be seen as a safe-haven alternative but has lost some of its luster as data showed Japan’s economy shrank in the fourth quarter as exports fell sharply.

NEW YORK, March 2 (Reuters)